Analysis Kraft Foods

1. Income changes 2008-2010:

2010: 2009: 2008:

Net Sales: $49,207 Net Sales: $38,754 Net Sales: $40,492

COGS: $31,305 COGS: $24,819 COGS: $27,164

Gross Profit: $17,902 Gross Profit: $13,935 Gross Profit: $13,328

Operating Exp: $12,201 Operating Exp: $ 8,784 Operating Exp: $ 8,613

Operating Inc: $ 5,666 Operating Inc: $ 5,183 Operating Inc: $ 3,576

2009-2010

In 2010, Kraft’s Gross Profit increased from 36% to 36.4 % even though their operating margin decreased from 13.4% to 11.5%. Kraft’s reported total expenses increased by $3,217 million in 2010, but once the impacts of divestures, foreign currency and the Cadbury acquisition are considered, decreased by $25 million in 2010. Operating income increased by 483 million in 2010. Higher pricing was overshadowed by higher input costs. Operating income from the Cadbury segment significantly increased total operating income for the year.

2008-2009

In 2009, Kraft’s Gross Profit increased from 32.9% to 36%, even though their Sales figures decreased. Operating income increased from $1,607 million to $5,183 million in 2009 due to higher pricing, lower input costs and lower Restructuring Program costs.

2. Kraft recognizes revenue when the products are shipped or received by Kraft’s customers and shipping and handling billed to the customers I considered part of revenue. Kraft’s costs of shipping and handling are considered a Cost of Goods Sold Expense. Revenues are recognized after promotions and consumer incentives (rebates, coupons, promotional agreements with customers). Kraft also reduces revenues by allowing for bad debt and returns in the same period as revenues are recognized. This explanation appeared in the section: Summary of Significant Accounting Policies under Note 1.

3. Kraft Foods’ basic earnings per share is reported as $ 2.40 for the year ended 12/31/10. $ 1.44 is from continuing operations and $ 0.96 from discontinued operations. Diluted earnings per share is reported at $ 2.39, net. $ 1.44 from continuing operations and $ 0.95 from discontinued operations. This figure is found on the Consolidated Statement of Earningss on page 55 of the Annual Report.

4. Kraft Food Inc.’s AOCI is listed as a single line item on the Statement of Equity, page 57 of the Annual Report. A breakdown description follows on page 77, Note #9 of the annual report where the components are described in detail. The company’s comprehensive income is reported separately (two-statement format).

5. Change in AOCI: AOCI was affected negatively by Currency Translations